Do all your innovations necessarily require a patent?

The news broke on 15 August 2016: Switzerland remains the best country in the world in terms of innovation according to the World Intellectual Property Organisation (WIPO). Our country leads ahead of Sweden and Great Britain, with the USA in fourth place.

This ranking refers us to another, published in March 2016. Indeed, we are also "European Champions for patent applications per capita" according to the European Patent Office, with more than 7,000 applications filed in 2015. Switzerland, with 873 applications per million inhabitants in 2015, leads ahead of the Netherlands, Sweden, Finland, and Germany.

These two rankings placed side by side send a signal to entrepreneurs: to innovate, one simply needs to patent — and it is even the necessary condition. But before rushing in headfirst, it seems essential to question the real usefulness of patents and to ask in which cases it is appropriate to "file."

The impossible secret to reveal

The first question to ask is that of confidentiality. As Peter Thiel recalls in his book "Zero to One" — a best-seller on innovation and start-ups — all great companies have a secret that is impossible to reveal. The founder of PayPal even adds that it is this secret that is the key to their success.

How then to find the right balance between the need to protect one's invention and the need not to disclose it? Knowing that to file a patent one must make public the information necessary for the implementation of the invention — to what extent can one describe the essentials of one's invention without divulging manufacturing secrets, plans, know-how, a quality process, an algorithm… or any other "secret" that one has kept until now and which has allowed the company to distinguish itself?

If the invention is intimately linked to its secret, is it not sometimes better to forgo publication? Before filing a patent, the company must perform a risk-benefit calculation on the best attitude to adopt: when one patents, the invention may be "protected," but the information describing it no longer belongs to you, and it will not fail to inspire your competitors.

Letting competitors copy

Another strategy could consist of taking the opposite view to the proprietary vision of patent filing, by letting your competitors copy you and using this situation to your advantage. Thus, realising he had been copied, Jean-Claude Biver, the head of Hublot, took the opportunity to communicate a message widely: as long as you maintain a lead over your competitors, copies can serve to expand your market and enhance your products. This "ruse" would even be a strategy of choice for technologies with a very short lifecycle. For while your competitors waste time copying you, you can continue to focus on innovation.

With the recent advent of the collaborative economy, the entrepreneurial innovator wonders: "Is it still necessary to patent?" Some websites offer co-creation solutions and the idea of "universal sharing as a source of mutual progress" seems to be gaining ground. Confusion sets in with the erroneous interpretation that "open" would be synonymous with the absence of rules, obligations, and rights management in developments. Yet if that were the case, patents would indeed become obsolete in the future.

Patent trolling

Conversely, some have made a profession of speculating on patent portfolios. Originating in the United States, the phenomenon of "patent trolling" concerns entities that have never invented anything and invest in third-party patents. These consortiums can make fortunes managing patents they do not exploit.

In this new world in recomposition — between the utopian vision of a world without patents and the relentlessness of patent trolls who speculate on them — the entrepreneur wonders: should I protect my invention? And if so, when and how?

The usefulness of patents is not only to "protect" innovations, as is often the prevailing opinion. For the entrepreneur, it is above all a tool — among others — that serves to develop their business and maintain a lead over competitors.

For an innovative company, patents can contribute to a better valuation of its capital. A patent portfolio can play a decisive role with potential investors. The company can also use patents to communicate to the public an image of innovation and product exclusivity. The shampoo with a "patented formula" reassures us that we are buying a good product — but how many consumers have truly bothered to find out what it contains?

Within a strategic plan, patents undeniably offer intangible assets that contribute to increasing company capital. A patent can have an intrinsic value independent of the invention it is supposed to represent — particularly in the context of valuation with potential investors during a fundraising round.

From this perspective, it should come as no surprise that patents are expensive. A substantial sum is needed to protect one's innovations seriously, particularly at the international level.

Filing at the right moment

As with any investment, one seeks to optimise return on investment — but in the case of patents, the benefit is difficult to quantify at the moment the investment decision must be made, given the prospective and indirect nature of the patent's effect.

The timing of the patent filing is therefore essential. One must of course file before disclosing, but filing too far in advance risks being sub-optimal, as it is more difficult to anticipate all the developments needed to reach the finished product and therefore to guarantee that it will be properly covered. Conversely, the longer one waits for the invention to mature before filing the patent, the stronger the protection around the commercially interesting product. With, in this case, one major risk: no longer being able to protect the invention if it becomes known, or finding oneself prevented from exploiting it if a competitor files a patent first.

Hence the importance of being accompanied by professionals with experience not only in protection but also in the use of patents as valuation tools — to avoid major pitfalls and optimise return on investment.

The investment in initial protection must imperatively be accompanied by the drafting of an application, strategically choosing what one can/wishes to reveal and what one chooses to keep secret. Particular attention must be paid to the management of confidentiality and the chain of rights from inventors to the final patent holder. It is, for example, imperative to have all partners and all collaborators sign confidentiality agreements (a fortiori in the context of collaborations or external service contracts), and even to partition internal access to sensitive information that forms part of the company's know-how.

Between a strategy of "protection at all costs" or, conversely, a quasi-ideological allergy to patents, a prudent attitude is called for. One must reason on a case-by-case basis. Patents can quickly become expensive dusty certificates if one does not take care to adapt one's strategy to the company's real needs. The questions the entrepreneur must systematically ask themselves therefore boil down to "what does the patent bring to the valuation of my company?" and "what commercial interest am I seeking to protect?"